Chinese banks suspend mortgage approvals amid fund shortage

September 24, 2013 Leave a comment

Chinese banks suspend mortgage approvals amid fund shortage

Staff Reporter

2013-09-24

China is once again facing a shortage of funds, with the benchmark overnight Shanghai Interbank Offered Rate (Shibor) rising to 3.56% from Sept. 6’s 2.95%, and banks have begun to suspend mortgage approvals, the Beijing-based China Times (not our sister paper) reports. China saw an unprecedented liquidity shortage in June, with the overnight Shibor on June 20 surging 578.4 basis points to 13.444%, a record high. Banks would typically start to tighten their mortgage approvals near the end of a year, but many have already begun doing so, the paper said. When Mr Lu applied for a mortgage for his house, a bank clerk told him that the bank may at best approve the mortgage a month later and there is no guarantee when the approval will be made. An unnamed bank executive confirmed that most banks have faced tightening approval practices in mortgages and other loans as demand for loans far exceeds the funds available. The executive, however, said the suspension of loan approvals began just one week before the Mid-Autumn Festival on Sept. 19, and liquidity will remain tight until the end of this month for his bank.According to the paper, several domestic banks including Minsheng Banking Corp and Industrial and Commercial Bank of China, have all suspended mortgage approvals, while metropolitan banks such as the Bank of Nanjing have also suspended mortgage approvals and won’t accept new applications until the end of this month. One state-run bank official said his bank still goes through the normal process for mortgages, but its branches will at the quickest approve the applications at the end of October.

Central bank figures show that in the first half of the year, financial institutions’ new property-related loans totaled 1.3 trillion yuan (US$212.4 billion), up 732.6 billion yuan (US$119.7 billion) from the same period a year earlier, and almost reaching the whole 2012 new mortgages of 1.35 trillion yuan (US$220.5 billion). Meanwhile, mortgages for individual residential mortgages in the first half of the year accounted for 80%.

The current operation is a reasonable risk control, not a suspension of mortgages, said an executive at the Beijing branch of Shanghai Pudong Development Bank, adding that the bank still continues to support those clients with good economic outlooks and backed by the national development policy.

In fact, the central bank has continued to conduct reverse repurchase agreement transactions in the banking system to maintain the liquidity balance, hoping liquidity won’t become too loose, another banking executive said.

Filed under Macro Trends

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